i OVERVIEW OF GOVERNANCE REGIME

i Sources of law and enforcement

The Korean Commercial Code (KCC) is the basic law on corporate governance in Korea. Additional matters regarding the governance of listed companies are stipulated in the Listing Rules on the Securities Market, the Listing Rules on the KOSDAQ Market and other rules set forth by the Korea Exchange (KRX), which have been established by the Financial Investment Services and Capital Markets Act (FSCMA) and the special rules for listed companies set forth in the KCC.

The Act on Corporate Governance of Financial Companies (Corporate Governance Act) shall apply in preference to the KCC with respect to the corporate governance of financial companies.

Although they are not related to corporate governance, the FSCMA sets forth separate rules for matters related to finance such as the issuing of new shares of a listed company or restructuring (including mergers and spin-offs), as well as various disclosures such as the registration statement.

The Ministry of Justice (MOJ) is responsible for the issuance of ex ante rulings under the KCC, and for the ex post facto imposition of fines or other sanctions for any breach of the KCC.

The Financial Services Commission (FSC), and the Financial Supervisory Service (FSS), which has been delegated with certain authorities of the FSC, are responsible for the issuance of rulings under the Corporate Governance Act and the enforcement thereof (including sanctions).

The KRX also manages and regulates listed companies through the examination and management of listings.

ii Nature and recent development of the corporate governance regime

In terms of corporate governance, under the KCC joint-stock companies and limited companies, which are the most common corporate entity forms in Korea, have four corporate governance bodies:

  1. the general shareholders' meeting;
  2. a board of directors composed of registered directors of the company;
  3. a representative director or directors appointed among the directors; and
  4. a statutory auditor or auditors, or an audit committee.

Among these bodies, the general shareholders' meeting is the supreme decision-making body, and it determines fundamental matters pursuant to the KCC and the articles of incorporation of the company. The board of directors makes decisions on important operational matters that are not specially reserved for the resolution of the general shareholders' meeting by the KCC and the articles of incorporation. Boards of directors consist of executive directors, outside directors, and non-executive, non-outside directors. Given that executive directors generally become members of the management, the management and the board of directors are not always clearly distinguished. The representative director has the authority to perform matters resolved by the board of directors, and to decide and perform ordinary management activities. The statutory auditor or the audit committee supervises the management of the company's business and audits the company's financials and accounts.

Amendments to the KCC in 2012 introduced the executive officers governance structure, consisting of officers who are not registered directors but who are responsible for carrying out the company's daily operations and implementing decisions of the board of directors, and decisions of the general shareholders' meeting under the supervision of the board of directors.2 If a company decides to have executive officers under its articles of incorporation, there will be no representative director. Accordingly, the company will be able to clearly distinguish the management and the board of directors by separating the executive functions from the board of directors; however, there have not been many cases where such structure has been actually used in Korea.3

Following the recent introduction of a stewardship code, which is accepted by the National Pension Service and other institutional investors, and the increased role of proxy advisory organisations, demands for the improvement of the governance regime, including management transparency, board diversity and the expertise of outside directors, has been growing. Accordingly, there has been an increase in the number of women, foreigners and professional managers being appointed as outside directors, and increased emphasis has been placed on the qualification of the independence of outside directors and audit committee members.

In particular, seeking board-focused management, the Corporate Governance Act stipulates that the chief operating officer, who is in charge of strategic planning, financial management, risk management and other major issues, shall be appointed or dismissed by a resolution of the board of directors.

ii CORPORATE LEADERSHIP

i Board structure and practices

Under Korean law, boards of directors shall have a single-tier structure. Except with regard to small companies, a board of directors may not be replaced, as it is an essential body that is required under the KCC.

However, the KCC adopts a committee within the board of directors system, whereby a committee established within the board of directors may be delegated with certain authorities of the board of directors and resolve on relevant matters.4 Under the KCC, the board of directors may decide whether to establish any committee at its own discretion pursuant to the company's articles of incorporation.

A listed company with total assets equal to or greater than 2 trillion won as of the end of the latest fiscal year (thus being a large listed company) must establish an audit committee and a committee to recommend outside director candidates.5

Financial companies are obliged to establish:

  1. a committee in charge of recommending candidates for outside directors, representative directors and audit committee members;
  2. an audit committee;
  3. a remuneration committee; and
  4. a risk management committee.6

The independence of the audit committee has been strengthened: at least two-thirds of the audit committee of a financial company or a large listed company is required to be composed of outside directors.

In addition to these legally required committees, listed companies are increasingly requiring the professional examination of a separate committee: for example, an internal transaction committee that examines the fairness of transactions between affiliates and specially related parties, or a remuneration committee that examines the remuneration system for directors and officers.

Composition of the board

The board of directors shall be composed of at least three directors, and there is no limit on the maximum number of board members. However, a company whose paid-in capital is less than 1 billion won may elect not to establish a board of directors.7

At least one-quarter of the total number of directors appointed in listed companies shall be outside directors, and a large listed company shall have at least three outside directors who will constitute a majority of the total number of directors.8

Company representatives

In principle, the representative director represents the company externally, and has the authority to undertake matters resolved by the board of directors, and to decide on and perform ordinary management activities internally. The board of directors has the authority to make material decisions regarding the company (e.g., the disposal or transfer of its material assets and the borrowing of large-scale property).9

In addition, Korean courts consider that a resolution of the board of directors shall be required for important matters that have not been generally and specifically delegated to the representative director by the board of directors and that do not fall under ordinary day-to-day operations.10

Directors participate in the decision-making processes of the board of directors, and exercise a supervisory role over the operations of the representative director or representative executive officer. However, in principle, a director may not represent a company without a delegation of the board of directors, the representative director, or both.

Legal responsibilities of the board

Directors shall be jointly and severally liable for damage suffered by the company if they have violated any law or the articles of incorporation due to their wilful misconduct or negligence, or if they have neglected their duties. If the foregoing acts have been conducted in accordance with a resolution of the board of directors, the directors who have consented to such resolution shall assume the same liability against the company.11

Directors may be exempt from the foregoing liabilities pursuant to unanimous shareholders' consent (this is highly unlikely for listed companies). The 2012 amendments to the KCC also provide that a director's liability that exceeds six times his or her annual salary (or three times, in the case of outside directors) may be exempt if the company has set forth relevant matters regarding this in the articles of incorporation in advance.12 However, such limits on liability shall not apply in certain cases, such as damage caused by a director's wilful misconduct or gross negligence, or by his or her violation of certain regulations regarding self-dealing (see below) provided under the KCC.

Directors may be liable under the Criminal Act for breach of fiduciary duty if they have breached their duty of care as bona fide managers or their fiduciary obligation to the company, and if the company has suffered damage due to such breach and such director or third party profited therefrom.13

Control of the board

In principle, meetings of the board of directors may be convened by any director. However, the articles of incorporation typically provide that the representative director is authorised to convene meetings of the board of directors. Any director may convene meetings of the board of directors if he or she is authorised to convene such meetings by a resolution of the board of directors.14

Usually, the representative director concurrently holds the position as chair of the board of directors, and has the authority to convene board meetings. Accordingly, in most cases the representative director, who doubles as chief executive officer and chair of the board, also leads the board of directors and management.

In principle, a financial company shall appoint an outside director as the chair of the board of directors. If a financial company appoints a person who is not an outside director as chair, a representative of the outside directors shall be appointed separately.15

Generally, although they are not legally obliged to do so, listed companies are increasingly appointing an outside director as the chair of the board of directors to ensure the objectiveness and independence of the board's examination procedures.

Delegation of board responsibilities

As the representative director represents the company, the general practice is to affix the seal of the company and attach the certificate of the corporate seal impression issued by the court on him or her so that he or she can carry out the company's external activities (including the execution of agreements).

In principle, the board of directors has the authority to make material company decisions, and to delegate certain authorities to committees within the board of directors.16

The board of directors may also delegate certain duties (except for matters requiring a resolution of the board of directors or any committee) to the representative director. Generally, a company's internal regulations stipulated by a resolution of the board of directors determine the matters on which the representative director is authorised to make decision at his or her own discretion without obtaining a resolution of the board of directors.

Separation of the roles of CEO and chair

There is no express provision on the authority or responsibility of the chair of a board of directors under the KCC. However, it is usually provided in the articles of incorporation that the representative director shall concurrently hold the position of chair of the board of directors. The chair shall assume the same responsibilities as other directors.

The representative director has the authority to perform business on behalf of the company, and the chair has the authority to convene and proceed with meetings of the board of directors.

Direct communication with shareholders

There is no law or regulation restricting the representative director or the chair from directly communicating with shareholders.

However, as the regulations on fair public disclosure apply to listed companies, and the FSCMA sets forth regulations on insider trading, a listed company's communications with its shareholders are subject to the limits set forth therein.

Remuneration of directors and senior management

The general practice is to have a cap on remuneration for all directors resolved at the general shareholders' meeting, and the amount of remuneration for respective directors resolved by a resolution of the board of directors. 17

For financial companies, matters regarding the methods for the determination and payment of the remuneration of officers (excluding outside directors, non-standing directors, audit committee members, compliance officers and risk management officers) need to be resolved by the remuneration committee, which is a committee established within the board of directors.18

There is no special provision on the amount of remuneration of non-registered officers (senior management). The general practice is to determine such amount at the representative director's own discretion or under regulations on officer remuneration resolved by the board of directors.

Committees

As discussed above, the board of directors may establish internal committees under the board, such as an audit committee.19

Large listed companies must establish an audit committee and a committee to recommend outside director candidates.20 Financial companies are also required to establish an officer candidate recommendation committee, audit committee, remuneration committee and risk management committee.21

Matters resolved by the committees (excluding the audit committee) may be resolved again by the board of directors.22

Board and company practice in takeovers

In the case of a hostile takeover, it may be possible for a board of directors to use defence tactics such as the acquisition of treasury shares or the issuance of new shares to friendly third parties, including specific shareholders. To issue new shares to friendly third parties, however, express grounds should be given in the articles of incorporation, and other regulatory issues exist (e.g., the issuance price will be restricted under the FSCMA). Furthermore, in a dispute over management control, the issuance of new shares to friendly shareholders for the purpose of defending against such dispute is likely to be invalidated by court.

A listed company may acquire treasury shares by a resolution of the board of directors in an amount up to its distributable profits, and may use methods such as tender offers or purchases on exchange.23

To defend against a hostile takeover, the articles of incorporation can stipulate the supermajority voting system for certain agendas of the general shareholders' meeting, including the dismissal of directors, or the golden parachute system, which requires the payment of a substantial amount of severance pay upon the dismissal of directors; however, it remains controversial whether these systems are permitted under the KCC.

ii Directors

Under Korean law, there is no difference between outside directors and executive directors in terms of their authority, obligations and responsibilities.24

Due to their independent status, there has been a lot of criticism about outside directors, with the contention being that they merely act as a rubber stamp without assuming actual roles in supervising the management of companies. However, outside directors have recently been expanding the scope of their actual participation in board of director decision-making processes by raising their opposition to specific agenda items or requesting additional examination.

In principle, notice shall be given to directors and statutory auditors no later than one week prior to a meeting of the board of directors in order to convene the meeting of the board of directors. This period may be shortened by the articles of incorporation, and the meeting may be held without convocation upon unanimous consent of all the directors and statutory auditors.25

There is no express statutory provision on whether outside directors are allowed or obligated to directly visit a subsidiary of the relevant company or engage in direct communication with lower management or employees. However, it would be difficult for outside directors to force such visits or communication without the permission of the management of a subsidiary, since the independence of an entity cannot be denied even for subsidiaries.

Legal duties and best practice

In terms of legal duties, there is no distinction between executive (inside) directors and outside directors. Both are obliged to perform their duties for the company in good faith in accordance with their duty of care as bona fide managers, and in accordance with the law and the articles of incorporation.26

Liability of directors

A director shall be liable for damage suffered by the company if he or she has violated any law or the articles of incorporation due to his or her wilful misconduct or negligence, or has neglected his or her duties.27 If the foregoing acts were performed in accordance with a resolution of the board of directors, the directors who have consented to such resolution shall assume joint and several liability against the company.

Directors may be exempted from the foregoing liabilities pursuant to unanimous shareholders' consent (which is highly unlikely for listed companies). As previously mentioned, if a director's liability exceeds six times his or her annual salary (three times, in the case of an outside director), it may be exempted if the company has set forth relevant matters in this regard in the articles of incorporation in advance.28,29

If a company fails to do so, shareholders may file a lawsuit against the directors on behalf of the company based on the directors' breach of their duties.30 Recently, there have been discussions about expanding the scope of derivative actions and introducing a multi-step derivative action system: that is, a system whereby the shareholders of a parent company may institute a derivative action against the directors of a subsidiary if those directors have caused damage to the subsidiary due to their negligence in the performing of their duties.

Directors may be liable under the Criminal Act for breach of fiduciary duty if they have breached their duty of care as a bona fide manager or a fiduciary obligation to the company, and the company has suffered damage due to such breach and such director or third party profited therefrom.31

Directors are appointed by a resolution of the general shareholders' meeting. When appointing two or more directors, use of a cumulative voting system may be requested, although most companies restrict such system through their articles of incorporation.32,33

If a listed company convokes a general shareholders' meeting to appoint directors, it shall provide certain information about the candidates to the shareholders. Directors may be appointed only from the candidates notified as above.34

Large listed companies shall appoint outside directors from those candidates recommended by the committee formed to recommend outside director candidates.35

For financial companies, candidates for outside directors, representative directors and audit committee members are recommended by the committee to recommend officer director candidates.36

The term of office of directors shall not exceed three years; however, such period may be extended by the articles of incorporation until the adjournment of an annual general shareholders' meeting convened with respect to the last fiscal year during a term of office.37

Although there is no special qualification requirement for executive directors, outside directors should satisfy certain qualification requirements that are mainly related to their independence.38

For large listed companies, at least one member of the audit committee should be an expert in accounting or finance.39 As for financial companies, certain qualification requirements are specified for the executive and outside directors.40

Conflicts of interest

To prevent a conflict of interest between a company and a director, when a director, or any of his or her relatives and entities he or she controls, intends to engage in a transaction with the company (self-dealing), the relevant party shall disclose the material facts regarding such self-dealing to the board of directors in advance, and obtain approval therefor by an affirmative vote of at least two-thirds of the total number of the directors. Any self-dealing shall be fair in terms of its conditions and procedures.41

According to the 2012 amendment to the KCC, a director shall also obtain the approval of the board of directors by an affirmative vote of at least two-thirds of the total directors to exploit business opportunities that are likely to present current or future profits to the company for his or her own benefit or that of a third party.42

Since outside directors cannot engage in the regular business of a company,43 they are not able to directly engage in the performance of a company's business. However, they shall monitor the management as members of the board of directors by, inter alia, reviewing and examining matters reserved to the board of directors, participating in the board of directors, engaging in discussions or exercising voting rights.

iii DISCLOSURE

Companies of a certain minimum size (including listed companies) are subject to an external auditor's audit. Under the Act on External Audit of Stock Companies, which has lately been restated:

  1. the independence of external auditors has been strengthened by requiring the FSS to designate an external auditor for a period of three years after a listed company's appointment of an external auditor for six years at its own discretion; and
  2. the external audit system has been reinforced by stipulating the obligation to submit internal accounting management systems to an external audit.44

All external audit reports shall be publicly disclosed under the applicable laws.

Listed companies and some other companies are required to publicly disclose certain matters, including audit reports, on a quarterly basis, and are also required to publicly disclose them in accordance with the FSCMA. The public disclosure regulations of the KRX are applicable to listed companies, including certain disclosure requirements in the event of any major decision such as the issuance of new shares, the acquisition of treasury shares, a merger or spin-off, and the transfer of a material business or asset.45 In addition, listed companies are obliged to make public disclosures in a fair manner so as to prevent any information gap due to the selective provision of important information to certain persons.46

Most public disclosures are mandatory, and the comply or explain model has been introduced for certain financial companies. Starting from 2019, under the recently amended KRX regulations, large listed companies are required to publicly disclose their corporate governance reports setting forth, inter alia, the current status of the protection of shareholders' rights, the independence of boards of directors, fairness in the course of the appointment of the directors, and the expertise of a company's internal and external audit organisations.

Communication between management and shareholders usually takes place through investor relations activities, and shareholders are increasingly requesting meetings with management, including directors.

iv CORPORATE RESPONSIBILITY

Financial companies are required to organise a risk management committee and appoint a compliance officer and a risk management officer.47

A listed company with total assets equal to or greater than 500 billion won should establish compliance guidelines, and appoint a compliance officer who is responsible for ensuring officers and employees comply with the compliance guidelines.48

Recently, the MOJ has been making efforts to facilitate the internal control processes by announcing the Standard Compliance Guidelines for Listed Companies to enhance the effectiveness of the compliance system. The Guidelines provide that:

  1. an internal reporting system for whistle-blowing may be established;
  2. personal information about whistle-blowers and details of related internal reports shall be kept confidential;
  3. extenuating circumstances shall be taken into consideration in cases where a whistle-blower reports a tort or illegal act in which he or she has been involved; and
  4. no whistle-blowers shall be subject to any disadvantages due to their whistle-blowing.

In addition, as corporate social responsibility has emerged as an important issue, there is growing interest in the ethical management of companies, and companies are increasingly disclosing their internal policies related to such issues.

With an increased emphasis on the importance of the ethics of owners or officers of large enterprises, their abuse of authority against employees often becomes a social issue. There are cases where officers have not only resigned but have also been held criminally responsible for committing abusive acts.

v SHAREHOLDERS

i Shareholder rights and powers

Every shareholder shall have one vote for each share held,49 and no extra vote or dividend shall be acknowledged for the reason that the shareholder has been holding shares for a long period of time. However, a company may issue shares without voting rights in accordance with the articles of incorporation. Because the appointment or dismissal of directors is a matter reserved to the general shareholders' meeting, shareholders have an indirect influence on the board of directors.50

Among other things, the following matters require a resolution of the board of directors as well as a special resolution of the general shareholders' meeting:51

  1. amendments to the articles of incorporation;
  2. reductions in paid-in capital;
  3. mergers or spin-offs of the company;
  4. the transfer of all or material parts of the business; and
  5. comprehensive share transfers and share exchanges.

However, not all matters reserved to the board of directors need to be approved by the shareholders.52

Minority shareholders holding a certain equity interest have certain rights depending on their shareholding, including:

  1. shareholder proposal rights;
  2. the right to call a general shareholders' meeting;
  3. the right to request a cumulative vote with regard to the appointment of directors;
  4. the right to request an injunction (suspension) for a violation by the directors; and
  5. the right to institute a derivative action and the right to inspect accounting books.53,54

ii Shareholders' duties and responsibilities

A shareholder of a listed company is required to publicly disclose his or her equity interest with regard to certain matters if the equity interest constitutes at least 5 or 10 per cent,55 but shall not assume any other special legal obligations or responsibilities.

However, any person who instructs a director to perform business by using his or her influence over the company shall assume the same responsibility as that director with regard to such instructed or performed business.56 It is possible that the foregoing responsibilities would be recognised for the controlling shareholder.

In cases of self-dealing, the relevant party shall disclose the material facts regarding the self-dealing to the board of directors in advance, and obtain the approval of the board by an affirmative vote of at least two-thirds of the total number of the directors to prevent a conflict of interest between the company and the major shareholder. Any self-dealing shall be fair in terms of its conditions and procedures.57 In addition, no listed company shall grant certain credit or provide debt guarantees to major shareholders and their specially related parties.58

Although there have been theoretical discussions on the responsibilities assumed by a controlling party against minority shareholders, there is currently no legislation in this regard.

Institutional investors' duties and best practice

Although no special statutory provision of any special legal obligations or responsibilities is available with regard to the exercise of shareholders' voting rights, institutional investors have recently been introducing a stewardship code; accordingly, the role of proxy advisory organisations, which provide advice on the details of exercising voting rights based on their analysis of the agenda of the general shareholders' meeting, has been reinforced.

To secure trust in the expertise of proxy advisory organisations, an amendment to the FSCMA has been proposed, and the introduction of a declaration system for proxy advisory organisations has been discussed, granting rights to request the submission of information to the FSC and to prohibit unsound business activities of proxy advisory organisations.

iii Shareholder activism

Shareholder activism is increasing in Korea, and proxy battles frequently take place. One activist recently carried out a campaign to publicly oppose the agenda for the restructuring of a large listed company, and the relevant agenda was not adopted.

There seem to be conflicting views about shareholder activism: on the one hand, such activity is not optimal for long-term corporate value, as it is merely seeks short-term profits; however, on the other hand, shareholder activism should be understood as a reasonable aim to protect minority shareholders and improve corporate governance.

Any person intending to solicit another person to exercise his or her voting rights by proxy for listed companies should public disclose this in advance and deliver the power of attorney or reference documents.59

iv Takeover defences

Given that every shareholder has one vote per share,60 dual class share systems are not an appropriate defence in Korea against a hostile takeover.

In the case of a hostile takeover, it may be possible for the board of directors to use defence tactics such as the acquisition of treasury shares or the issuance of new shares to friendly third parties, including specific shareholders. As previously mentioned, express grounds must be included in the articles of incorporation to issue new shares to friendly third parties, and other regulatory issues exist. Furthermore, in a dispute over management control, the issuance of new shares to friendly shareholders to defend against a takeover is likely to be invalidated at court. Listed companies may acquire treasury shares by a resolution of the board of directors in an amount up to their distributable profits, and may use methods such as tender offers or purchases on exchange.61

Another possible measure is selling treasury shares to friendly third parties, given that the disposal of treasury shares is also a matter reserved to the board of directors and is not subject to regulations on the issuance of new shares. Such practice, however, is generally perceived in a negative light.

The staggered board system is not prohibited under the applicable laws and regulations, and some listed companies operate this system.

As previously mentioned, in defending against a hostile takeover, the articles of incorporation can stipulate a supermajority voting system for certain general shareholders' meeting agendas, including the dismissal of directors or the golden parachute system; however, whether these systems are permitted under the KCC remains controversial.

v Contact with shareholders

Contact with shareholders usually takes place through investor relations activities, and shareholders are increasingly keen to meet with management, including directors. In some cases, management will hold individual meetings with major shareholders. Although holding individual meetings with a shareholder or certain shareholders is not prohibited, the selective provision of internal information only to some shareholders is not permitted. In such case, a company has an obligation to make fair public disclosures; provided, however, that selective provision of information would be exceptionally permitted if the receiving party signs an agreement that it will keep such information confidential and not engage in share transactions by using the relevant information.

Notice on the convocation of a general shareholders' meeting shall be given to shareholders at least two weeks prior to the date set for such meeting,62 provided that if a company has made a public disclosure of the convocation of the general shareholders' meeting, it may elect not to give notice thereon to shareholders with an equity interest representing less than 1 per cent.63

For listed companies, the system of soliciting a person to exercise a shareholder's voting rights by proxy is generally used. To this end, the person intending to do so should make public disclosure of this in advance, and deliver a power of attorney or reference document regarding this.64

Usually, shareholders do not expressly state whether they agree or disagree with the agenda submitted to the general shareholders' meeting. However, the National Pension Service has recently begun announcing how it would vote on certain agendas to the extent specific conditions are met.

vi OUTLOOK

In 2018, the state-run National Pension Service, which is the world's third-largest pension fund, adopted a stewardship code, and due to certain highly publicised cases of misbehaviour by owners recently, there is growing public opinion in Korea that shareholders should actively exercise their shareholder rights. Furthermore, shareholder activism has been on the rise in Korea, with an increasing number of domestic and overseas activist investors seeking to influence the management of large Korean conglomerates. We anticipate that the growth of activism will lead to increased attention being paid to corporate governance, especially regarding issues such as the re-election of owners as executive directors, concurrent directorships, and the independence and diversity of outside directors.


Footnotes

1 Hyeon-Deog Cho and Min-Yung Hong are senior attorneys and Jung-Chull Lee is a foreign attorney at Kim & Chang.

2 Articles 408-2 to 408-9.

3 In Korea, discussions continue regarding using governance restructuring to reinforce the independence of boards of directors and statutory auditors (and audit committees) from controlling shareholders.

4 Article 393-2 of the KCC.

5 Articles 542-8 and 542-11 of the KCC.

6 Article 16 of the Corporate Governance Act.

7 Article 383 of the KCC.

8 Article 542-8 of the KCC.

9 Article 393 of the KCC.

10 The courts view that, if a representative director acts for and on behalf of a company at his or her own discretion without obtaining a resolution of the board of directors, even when such act an requires the resolution of the board of directors, the relevant transactional activity shall be effective unless the counterparty knew or was able to know that the resolution of the board of directors had not been obtained. In such case, the company asserting that the counterparty knew or was able to know that the resolution of the board of directors had not been obtained shall assume the responsibility to verify such fact.

11 Article 399 of the KCC.

12 Article 400 of the KCC.

13 Article 355, Paragraph (2) of the Criminal Act.

14 Article 390 of the KCC.

15 Article 13 of the Corporate Governance Act.

16 Article 393-2 of the KCC.

17 Article 388 of the KCC.

18 Article 22 of the Corporate Governance Act.

19 Article 393-2 of the KCC.

20 Articles 542-8 and 542-11 of the KCC.

21 Article 16 of the Corporate Governance Act.

22 Article 393-2 of the KCC.

23 Article 165-3 of the FSCMA.

24 There can be an actual difference, however, in the accessibility to a company's information between executive directors who are engaged in the ordinary business affairs of the company and who are members of the company's management; and outside directors who have limited involvement in the management of the company.

25 Article 390 of the KCC.

26 Article 382, Paragraph (2) and Article 382-3 of the KCC, and Article 681 of the Civil Code.

27 Article 399 of the KCC.

28 Article 400 of the KCC.

29 However, such limit on liability shall not apply in certain cases, e.g., damages caused by a director's wilful misconduct, or gross negligence or violation of certain regulations, such as self-dealing, provided under the KCC.

30 Article 403 of the KCC.

31 Article 355, Paragraph (2) of the Criminal Act.

32 Articles 382 and 382-2 of the KCC.

33 Recently there have been discussions about amending the KCC to make the cumulative voting system mandatory for listed companies of a certain minimum size.

34 Articles 542-4 and 542-5 of the KCC.

35 Article 542-8 of the KCC.

36 Article 17 of the Corporate Governance Act.

37 Article 383 of the KCC.

38 Article 382, Paragraph (3) and Article 542-8 of the KCC.

39 Article 542-11.

40 Articles 5 and 6 of the Corporate Governance Act.

41 Article 398 of the KCC.

42 Article 397-2 of the KCC.

43 Article 382, Paragraph (3) of the KCC.

44 Articles 11 and 8 of the Act on External Audit of Stock Companies.

45 Articles 159 and 161 of the FSCMA, and Article 7 of the Regulations on Public Disclosure on the Securities Market.

46 Article 15 of the Regulations on Public Disclosure on the Securities Market.

47 Articles 16, 21, 25 and 28 of the Corporate Governance Act.

48 Article 542-13 of the KCC.

49 Article 369 of the KCC.

50 Articles 382 and 385 of the KCC.

51 Articles 374, 434, 438, 522 and 530-3 of the KCC.

52 The appraisal rights of dissenting shareholders are acknowledged for some matters requiring the approval of the general shareholders' meeting as described above (e.g., merger and comprehensive share transfer).

53 Articles 363-2, 366, 382-2, 402, 403, 466 and 542-6.

54 Requirements for the exercise of minority shareholders' rights shall be relaxed for listed companies with certain restrictions on holding periods (Articles 363-2, 366, 382-2, 402, 403, 466 and 542-6).

55 Articles 147 and 173 of the FSCMA.

56 Article 401-2 of the KCC.

57 Article 398 of the KCC.

58 Article 542-9 of the KCC.

59 Article 152 of the FSCMA.

60 Article 369 of the KCC.

61 Article 165-3 of the FSCMA.

62 Article 363 of the KCC.

63 Article 542-4 of the KCC.

64 Article 152 of the FSCMA.